As anticipated, the SEC approved today by a 3-2 vote proposed amendments to the proxy rules governing proxy advisor services and shareholder proposal (re)submission and eligibility requirements.
Highlights of the proposals addressed in the respective releases and Fact Sheets include:
Proxy advisor-related proposals
- Proxy advisors relying on the Rule 14a-2(b) exemptions from the information and filing requirements of the proxy rules must:
- Include disclosure of material conflicts of interest in their proxy voting advice
- Provide companies an opportunity to review and provide feedback on their proxy voting advice before it is issued
- Allow companies to include a link in the proxy advisor's voting recommendations that directs the recipient of the advice to the company's views about it
- Amendments to Rule 14a-9 (antifraud provision) would provide illustrative examples of when the failure to disclose certain information in the proxy voting advice could be considered misleading
Shareholder proposal rules
- Changes to the Rule 14a-8(b) eligibility requirements would eliminate the 1% threshold and replace the $2,000 monetary threshold for submittal with these thresholds, any of which would satisfy eligibility:
- Continuous ownership of at least $2,000 of the company’s securities for at least three years
- Continuous ownership of at least $15,000 of the company’s securities for at least two years
- Continuous ownership of at least $25,000 of the company’s securities for at least one year
- Shareholder proposal proponents would need to represent that they can meet (in person or telephonically) with the company between 10 and 30 days after they submit the proposal to discuss it.
- Rule 14a-8(c) would apply the "one proposal rule" to each person rather than each shareholder.
- Proposal resubmission thresholds in Rule 14a-8(i)(12) would be amended from 3%/6%/10% to 5%/15%/25% for matters voted on once, twice or three times or more (respectively) previously within the preceding five calendar years.
- Notwithstanding attainment of 25% vote support, a new provision would allow a proposal to be excluded if it has been voted on three or more times in the preceding five years if it received less than 50% of the votes cast and shareholder support for the proposal declined 10% or more compared to the immediately preceding vote.
Both proposals are subject to a 60-day comment period after publication in the Federal Register.
See these open meetings statements from SEC Chair Clayton and Commissioners Elad Roisman, Hester Peirce: proxy advisor services and shareholder proposals, Robert Jackson, and Allison Herren Lee, and this Pensions & Investments article. We will be posting summaries and analysis of the proposals real-time on our Proxy Advisors and Shareholder Proposals pages.